Zero Price Interconnection Not Always the Answer, TPI Panelists Say
There’s a lot of talk about the hypothetical next Netflix of the world being kept out of the game because it can’t afford to pay an ISP for peering (CD March 24 p1), but small players don’t need to pay for peering because they have lots of ways to get into an ISP’s network, said MIT professor David Clark at a Technology Policy Institute event Monday on Internet economics in a changing video and data environment (http://bit.ly/1rWseXs). Panelists questioned whether mandating free interconnection makes sense given the asymmetrical traffic loads involved.
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Of more than 50 peering points on Comcast’s network, only three or four are congested, Clark said. If small players face one of those congested peering points, they can route around them. It’s the big guys, like Netflix and YouTube, that face problems, Clark said: “Wherever they show up, they're going to cause massive congestion unless we re-engineer.”
"Zero can’t be the right price all the time,” said Stanley Besen, senior consultant at Charles River Associates. When the old model of reciprocal traffic management isn’t the best way to handle traffic, ISPs need flexibility to experiment free from regulation, which hampers that flexibility, he said. When an ISP is forced to peer for free, what’s the obligation on the other side? Besen asked. “Simply labeling these things ’tolls’ is not a good analysis."
It’s not like old times, when networks were roughly equal in size and traffic loads were balanced, said Clark. Akamai, Google and Netflix don’t look like Verizon, he said. “Viscerally, what is the balance” being sought in peering? he asked. If forced to peer at a zero price point, ISPs simply won’t peer, Clark said, noting there is no obligation to do so. Were the government to require peering, that would be a massive “distortion” of the market, he said.
It’s important to encourage negotiation, said Joseph Cavender, Level 3 vice president-federal affairs. Level 3 has suggested a “commercially reasonable terms” requirement should apply to interconnection agreements, similar to what the U.S. Court of Appeals for the D.C. Circuit upheld in the data roaming case, he said. “You'll have a never-ending set of disputes,” replied Bob Crandall, senior fellow at the Technology Policy Institute.
Another proposal came in a paper by Wharton School professor Kevin Werbach, said economist Hal Singer in a question from the audience. Under that proposal, the FCC would permit parties to negotiate interconnection agreements voluntarily, but then bring them to the FCC for adjudication, Singer said. The problem, Besen said, is that it wouldn’t be a straightforward matter for the FCC to efficiently determine if an interconnection agreement were reasonable. FCC approval of interconnection agreements would be an “extraordinary” burden in an otherwise quick and flexible industry, he said.